Research
My doctoral dissertation studied traders’ behaviors in financial markets. We investigated the interactions between fundamentalists and positive‐feedback traders and their impacts on price fluctuations. My research interests are within the fields of behavioral finance, financial economics, complex systems, probability theory, dynamical systems, and game theory.
Personal advice for researchers of next generations:
(i) 澹泊以明志，寧靜以致遠 (不能好高鶩遠，不切實際); 盡信書，則不如無書 (溫故知新，還是得多讀書); and 勤能補拙，學道先學貧.
(ii) Listen and listen to yourself, then ask yourself what the next steps would be.
Essay Review - Fragile by Design: The PoliticalOrigins of Banking Crises and Scarce Credit
International Journal of Applied Behavioral Economics, Volume 5, Issue 1, pp. 48-52
doi: 10.4018/ijabe.2016010103
This paper provides review for Calomiris and Haber (2014) which demonstrates the links between politics and banking. In addition to the perspective in Calomiris and Haber (2014), several recent studies relating to financial crisis are also introduced here. Issues about illiquidity, insolvency, credit boom, accuracy of credit rating, and neglected risk are discussed in this paper. Banking system is the bridge connecting households and sectors in the economy, where the design of the banking system has significant influence on the outcome of countries.
Encyclopedia of Information Science and Technology, Fourth edition, Mehdi Khosrow-Pour, ed. (2018), 71-76
doi: 10.4018/978-1-5225-2255-3.ch006
This paper briefly review the literature on the topics of noise traders in the financial market. We cover the no‐trade theorem under perfectly competitive market in the 1980s, the noise trader approach to finance in the 1990s, and recent studies from several approaches related to noise traders, such as heterogeneous agent models, investor sentiment, retail investors, experimental analysis, and extrapolation. Understanding and tackling the issues resulted from noise traders would be essential for us to realize how financial and economic markets work.
Speculative bubbles and Crashes: Fundamentalistsand Positive-Feedback Trading (with Prof. Young Shin Kim)
Cogent Economics & Finance, Volume 5, Issue 1
doi: 10.1080/23322039.2017.1381370
In this paper, we develop and examine a simple heterogeneous agent model, where the distribution of returns generated from the model takes into account two stylized facts about financial markets： fat tails and volatility clustering. Our results indicate that the risk tolerance of fundamentalists and the funding rate of positive‐feedback traders are key factors determining the path of price fluctuations. Fundamentalists are more able to dominate the market when they are more willing than positive‐feedback traders to take risks. In addition, more crises occur as positive‐feedback traders’ funding costs rise. Our model suggests that fundamentalists cause heavy-tailedness, and positive‐feedback traders cause the formation of speculative bubbles. Our model also indicates that the traders’ attitudes towards risk vary across time and the generally low level of risk bearing by fundamentalists could explain the frequent occurrence of bubbles.
Stochastic Deflator for an Economic Scenario Generator with Five Factors (with Prof. Frédéric Planchet)
Bankers, Markets, Investors, n°157, June 2019
In this paper, we implement a stochastic deflator with five economic and financial risk factors: interest rates, market price of risk, stock prices, default intensities, and convenience yields. We examine the deflator with different financial assets, such as stocks, zero‐coupon bonds, vanilla options, and corporate coupon bonds. We find required regularity conditions to implement our stochastic deflator. Our numerical results show the reliability of the deflator approach in pricing financial derivatives.
Listen to the signals from an interactive agent‐based model
Applied Economics Letters, 28(21), 1884-1888 (2021)
In this paper, we develop a trading strategy based on the estimated results of an interactive agent-based model. We examine our trading strategy in nine markets proxied by market indices. Our strategy is able to ride the rising trend and avoid declining periods. In addition, our strategy could outperform market index in some financial markets.
Transition among States behind Interactive Agent Model
Computational and Mathematical Organization Theory, 28, 27–51 (2022)
In this paper, we introduce a simple interactive agent mechanism, where the distribution of returns generated from the mechanism match stylized facts in financial markets. We introduce one more key factor, the length of time horizon on performance evaluations between strategies, which also has a significant influence on price fluctuations. To investigate the transitions among states, we introduce a Markov transition matrix, Perron‐Frobenius transition matrix, and Inertia. Our simulation results show the stickiness of states switching from one to another, and the longer length of time horizon on performance evaluations would generate more complex dynamic price fluctuations. We link our simple heterogeneous agent mechanism with Markov trajectory entropy and provide a total score and probability density functions of representations under two states as applications for the mechanism.
Fundamentalists in the cryptocurrency markets (with Prof. Chinho Lin)
Applied Economics Letters, 31 (6), 535-544 (2024)
In this study, we apply an interactive agent‐based model to investigate fundamentalists and positive-feedback traders behaviours in cryptocurrency markets. Our results suggested that fundamentalists pushed up cryptocurrency prices in some past periods. In addition, the cryptocurrency markets are unstable and agitated.
Diversification, hedging, and safe-haven characteristics of cryptocurrencies: A structural change approach (with Prof. Shu-Han Hsu and Prof. Yiwen Yang)
International Review of Financial Analysis (2024)
This study investigates the influence of structural change on the diversification, hedging, and safe-haven characteristics of Bitcoin and Ethereum against various financial assets such as gold, the US Dollar Index, stock indices, oil, and commodity indices from August 7, 2015, to August 15, 2022, using the DCC–ARMA–GARCH models with the CUSUM test. Our results indicate that cryptocurrencies have the same characteristics vis-à-vis financial markets during the entire sample period and periods tied to the date of major international events (COVID-19 and the early-2022 Russia–Ukraine War). However, we find that cryptocurrencies play different roles against specific asset markets in different periods separated by structural change models. Our findings suggest that incorporating structural changes into a model accounts for higher volatility and may better describe the real-world capabilities of cryptocurrencies against financial assets.